INCREASING THE UPTAKE OF FORMAL INANCIAL SERVICES … · 2017-12-08 · providers including bKash,...

Financial Inclusion Week Event Highlights

Last Updated: January 2017

“INCREASING THE UPTAKE OF FORMAL FINANCIAL

SERVICES THROUGH A CLIENT-CENTRIC APPROACH”

EVENT HIGHLIGHTS

USAID’s Mobile Solutions Technical Assistance and Research (mSTAR) project, implemented by FHI 360,

hosted “Increasing the Uptake of Formal Financial Services through a Client-Centric

Approach” on October 19, 2016 to discuss driving financial inclusion in Bangladesh through client-centered

digital financial services. Financial Inclusion Week in Bangladesh provides an opportunity for a global

conversation around the need for individuals and businesses to have access to a range of quality financial

services at affordable prices, with convenience, dignity, and consumer protections, delivered by a range of

providers in a stable, competitive market. This year’s Financial Inclusion Week theme was keeping clients,

end users and corporate users of financial services, first in a digital world. mSTAR/Bangladesh took part

in this global conversation with organizations like BRAC and EcoBank Foundation.

The event included participation by over 35 professionals representing Bangladesh Bank, International

Finance Corporation (IFC), member ofThe World Bank Group, United Nations Capital Development

Fund (UNCDF), USAID’s Rice Value Chain project, WorldFish, BRAC, MasterCard Foundation, Bank Asia

Limited, SureCash, bKash, Dutch-Bangla Bank Limited, The City Bank Limited, IFIC Bank Limited,

Opening Remarks of the event. Photo credit: USAID’s mSTAR project

https://www.microlinks.org/library/mstar-mobile-solutions-technical-assistance-and-research-activity-profile-bangladesh



GrameenPhone, Robi Axiata Limited, USAID’s Agro-Input Project (AIP), USAID’s Rice and Diversified

Crop (RDC) project, USAID’s Agricultural Extension Support Activity (AESA), MicroEnsure, Business for

Poor – Bangladesh (BFP-B) funded by DFID, Shasthonet, CDF, SAJIDA Foundation, Change Associates,

The Daily Star and The Financial Express. Details of the participants are provided in Annex – 1.

Introductory Session

As part of Financial Inclusion Week, mSTAR/Bangladesh hosted an event focused on driving financial

inclusion in Bangladesh through client-centered digital financial services. mSTAR/Bangladesh technical lead,

Mr. Md. Majidul Haque in his opening

remarks for Financial Inclusion week

shared that in Bangladesh, efforts to

enroll people into formal financial

systems are crucial, as more than two-

thirds of adults lack access to a formal

financial account. He discussed the

importance of a multi-sectoral and

inclusive approach to accelerate

financial inclusion in Bangladesh. He

also mentioned that USAID’s mSTAR

project in Bangladesh is working with

USAID’s implementing partners to digitize their payments and recently has begun focusing on helping

digital financial services providers to customize their products and services to serve the needs of

development projects. Mr. Haque introduced the mSTAR/Bangladesh team to the participants and thanked

all participants for participating in the event despite their busy schedule.

Financial Inclusion & Bangladesh Context

In this session, Mr. Md. Ashraful Alam, Deputy General Manager – Financial Inclusion Department of

Bangladesh Bank, gave a presentation on the steps taken by the government of Bangladesh and the central

bank of Bangladesh (Bangladesh Bank) to accelerate financial inclusion in Bangladesh. There is no national

definition of financial inclusion and as such the term is used in various ways. He discussed how use of

financial services is different in the urban areas than in rural areas and further said that an individual may

have multiple financial accounts in urban areas whereas an individual living in a rural area may not have a

single account. Additionally the demand of the financial services also varies between urban and rural areas.





In his presentation, Mr. Alam mentioned that the Bangladesh Bank had opened 10 Taka Account for

rural farmers to enroll them into formal

financial systems. He shared that seeing

the high penetration of mobile phones

in Bangladesh, the government

provided licenses to banks to offer

mobile financial services (MFS) and

agent banking to bring formal financial

services to the doorstep of rural users.

He shared that there are over 37

million MFS users in addition to over

80% over-the-counter transactions, and

1200 agent banking outlets serving

more than 0.3 million clients. Mr. Alam

urged the banking system to continue

digitizing to keep up with government

initiatives to digitize the country. He further mentioned that Bangladesh Bank had formulated an MFS

regulation and is actively considering to update the regulation to accommodate the needs of people.

Challenging the Barriers!

In this session, participants were provided with five development scenarios and they worked in groups to

identify challenges and recommend possible ways to enroll the scenario character into formal financial

services. The scenarios highlighted key challenges associated with cash faced by different groups of people

including rural housewives, people with physical disabilities, couples residing at remote areas, rural

schoolgirls and tenant farmers. Participants in five groups identified the challenges faced in these scenarios

with using cash and presented their recommendations. The scenarios, challenges identified and the

recommendations provided are detailed in Annex – 2.



This document is made possible by the generous support of the American people through the United States Agency

for International Development (USAID). It was written by Kazi Amit Imran. mSTAR offers on-demand technical

assistance to support USAID implementing partners in Bangladesh with the transition from cash to mobile and

electronic payments. To learn more about technical assistance options, contact Majidul Haque, Technical Lead at

[email protected].

Paving the Future

In this session, participants shared their thoughts on financial inclusion and how they intend to accelerate

financial inclusion. Participants shared that the key challenges to financial inclusion are the absence of

formal financial outlets and lack of financial literacy in rural areas. In terms of access, a representative from

BFP-B shared that they are working with select DFS providers to scale up their services at the rural level.

Addressing the latter challenge, a representative from BRAC shared that they are working with rural

people to increase their knowledge on financial products and enhance numeric and financial literacy. DFS

providers including bKash, DBBL (newly branded as ROCKET), Bank Asia Limited and SureCash shared

that they are working to increase their coverage by recruiting more agents at the rural areas to tap the

financially excluded communities.

The event ended with a call to increase financial literacy to accelerate financial inclusion in Bangladesh.

Representatives from Bangladesh Bank, DFS providers and development organizations shared that an

inclusive and multi-sectoral approach is required to accelerate financial inclusion in Bangladesh. Participants

applauded the good practices initiated by different stakeholders and shared that escalating the agenda to

foster financial inclusion is required to increase adoption of digital financial services by rural communities.

DISCLAIMER

The views expressed in this publication do

not necessarily reflect the views of the U.S.

Agency for International Development or

the U.S. Government.

mailto:[email protected]

mailto:[email protected]



Annex – 1

Participants List

SL. Name Organization/ Project

1 Khondker Zunaed Rabbani AIRN of USAID’s Agro Inputs Project (AIP), CNFA

2 Nasir Ahmed USAID’s Rice and Diversified Crops activity, ACDI/VOCA

3 Md. Ashraful Alam Bangladesh Bank

4 Adil Raihan Bank Asia Ltd

5 Rumana Tulee Bank Asia Ltd

6 Akhter Hamid Bank Asia Ltd

7 Rashed Al Hasan BFP - B

8 Chris August BFP - B

9 A.T.M Mahbub Alam bKash Ltd

10 Tanjilut Tasnuba Social Innovation Lab, BRAC

11 Khairul Bashor CDF

12 Yasir Arafat Change Associates Ltd

13 Md. Jahid Islam DBBL

14 Md. Firoz Kabir DBBL

15 Dr. Md. Younus Ali USAID’s Agricultural Extension Activity (AESA), DAM

16 Rasheda Sultana Grameenphone

17 Takreem Siddiqui IFC

18 Monirul Islam IFIC Bank Ltd.

19 Md. Masud Rana IRRI

20 Syed M Kamal Mastercard

21 Zakia Sultana Mastercard

22 Salima Jahan MicroEnsure

23 Galib Bin Jasim Robi Axiata Ltd

24 Md. Kawruzzaman Sajida Foundation

25 Sharif Hasan Khandaker ShasthoNet

26 M. Zahirul Islam SureCash

27 M.A Raihan SureCash

28 Nazmul Karim The City Bank

29 Sajal The Daily Star

30 Saif Uddin The Financial Express

31 Ziaul Hoque Mukta UNCDF



32 Murad Ahmed WorldFish

33 Zillur Rahman FHI 360

34 Md. Majidul Haque FHI 360

35 Tajmary Akter FHI 360

36 Tasnuba Sinha FHI 360

37 Kazi Amit Imran FHI 360



Annex – 2

Summary of Group Work



IDENTIFYING THE CHALLENGES:

SL Title Description

01 Conservative family The group shared that as Reshma resides in the countryside

and belongs to a conservative family, it is difficult for her to

travel to far locations to collect cash.

02 Lack of control over timely fund

transfer

The group shared that as Rezaul needs to depend on others

to transfer the money to his wife Reshma, timely delivery in

every occasion is not possible. This dependency in

transfering money is a challenge for the couple.

03 Location of Reshma The group shared that since Reshma resides in a remote

area it is difficult for her to travel to other locations to

collect cash because of the poor physical infrastructure.

Moreover, the group also mentioned that it is also difficult

for her to travel to the bank branch as bank branch is

located in the city hub. Travelling for Reshma is not only

troublesome but it also incurs costs which the couple needs

to pay.

04 Risk of losing money The group mentioned that since Rezaul sends the money

through other people, there is a chance of losing the money

risk of potential theft as the money is physically carried to

his village. In addition, since Reshma also needs to travel to

collect the cash, additional risk of theft exists.

05 Cost of transferring fund The group shared that Rezaul and Reshma frequently use

this self-tailored channel to transact among themselves.

Though the actual fund transferred is not very high but the

cost associated with it in making the transfer is quite high.

POSSIBLE SOLUTIONS:


01 Increase literacy of the couple on

MFS

The group mentioned that both Rezaul and Reshma require

hands on training to increase their competency to use

mobile financial services. The group also shared that the

MFSPs should create an enabling environment so that the

couple residing at the rural area can learn about different

products and services offered by the MFSPs.



02 Lack of control over timely fund

transfer

The group recommended that the couple can use the MFS

channel to transfer fund as per their need. This will give

them privacy and more control over their money.

Additionally, since funds can be transferred instantly over

the MFS channel, the couple will not need to rely on others.

03 Location of Reshma The group shared that once the couple starts to make

financial transaction over MFS channel, Reshma will no

longer need to travel to other locations to collect cash

which will save both her time and money. Moreover, this

will encourage Reshma to save some money in her MFS

account for deal with unexpected expenses.

04 Risk of losing money The group shared that once the couple start to transact

money using MFS channel, the risk associated with losing

money will be eliminated.

05 Cost of transferring fund The group shared that Rezaul and Reshma frequently use

this self-tailored channel to transact among themselves.

Though the actual fund transferred is not very high but the

cost associated with it in making the transfer is quite high.

The group shared that transferring money over MFS

channel will incur some cost during P2P transfer and cash

out for the couple, however, it is relatively low and taking

associated costs into account this process of transferring

money will be less costly.





01 Accessibility to formal financial

services

The group shared that as Karim resides at the outskirts of

Jessore, he has little access to formal financial services

outlets. The presence of microcredit providers near his

residence reduces his urge to seek formal financial services

from bank branches which are located at city hubs.

02 High debt burden ratio The group shared that the debt burden ratio of Karim is

high as he has an existing loan from local MFI. As such having

access to low interest credit from banks is difficult for him.

03 Negotiation power The group shared that as Karim farms with financial support

of a local MFI, he has less negotiating power as he needs to

sell off his harvest as quickly as possible to settle his debts.

04 Unsecured livelihood The group shared that Karim’s farming and earning is

dependent on the loan from an MFI and he has no option

to switch his profession. As such he leads a vulnerable

livelihood as one financial shock will collapse his earning

source.

05 Low level of financial literacy The group mentioned that though Karim has reflective

knowledge on managing finances but he lacks the formal

financial literacy which leads him to make poor financial

decisions.

POSSIBLE SOLUTIONS:


01 Accessibility to formal financial

services

The group mentioned that agent banking and mobile

financial services can play a crucial role in introducing Karim

to formal financial system. The group shared that once he

learns more about formal financial services, he will be able

to make better financial decisions.

02 High debt burden ratio The group shared that the high DBR is mostly because of

Karim taking loans at a high interest rate. The group

mentioned that if he can settle the existing loans and take a

loan from a bank, his DBR will slowly come down as he will

need to pay back less amount.



03 Increased control over harvest The group shared that once he is enrolled with formal

financial services, his urgency to repay loans will be lower

and thus he will have more negotiating power over selling

his harvest. In addition, as Karim will not be tagged with any

MFI, he will have more flexibility in selecting his input

retailers.

04 Increase literacy of the couple on

MFS

The group mentioned that both Karim and his wife require

hands on training to increase their competency to use

mobile financial services. The group also shared that the

MFSPs should create an enabling environment so that the

couple residing at the rural area can learn about different

products and services offered by the MFSPs.





01 Mobility It was mentioned by the group that the mobility of Kalam is

a key factor. As he is differently-abled he is skeptic to

undertake other challenging tasks.

02 Financial procedural concern The group shared that one of the reasons of why Kalam is

skeptical about taking loans is the existing lack of awareness

regarding how the financial system and institutions operate.

They also mentioned that he may have heard about a bad

experience from his network which induced him to be

skeptical about taking loans.

03 Location of Kalam The group shared that as Kalam resides in a rural area

where formal financial institutions outlets are less frequent

or are located at distant places, it is inconvenient for him to

travel to the outlet. In addition, as he does not travel to the

bank branches frequently and is unaware of the formal

financial system and procedures, it is hard for Kalam to get

acquainted with the existing system.

04 Lack of awareness on micro-

credit and bank loans

The group shared that the fear that Kalam has regarding

loan repayments is because of his lack of awareness and

knowledge on micro-credit and bank loan processes or

because of past experience or reflective experience. The

group mentioned that increasing his understanding on loans

will eliminate his pessimism over loans.

05 No communication with DFSPs The group shared that Kalam has little to no communication

with any of the digital financial services providers, part of

which is partly because of his difficulty with moving around

and partly because of his pessimism over DFS.

06 Lack of collateral The group identified that the shop which Kalam runs and

the home where he stays are not owned by him. Therefore,

getting loans is difficult due to lack of collateral assets.

Because of his physical condition and variation in income it

is hard for him to get unsecured loans.



POSSIBLE SOLUTIONS:


01 Mobility The group shared that since Kalam is unable to easily move

to different locations to learn about financial systems and

procedures, MFS and Agent Banking can be a good way to

reduce his hassle. This will enable him to learn about

financial systems without having to travel long distances.

02 Financial procedural concern The group shared that it is important for Kalam to

understand the financial procedures before applying for

loans. The group suggested that providing financial literacy

training to both Kalam and his wife will be beneficial since

his wife can travel to places if required. Additionally, she will

also be able to contribute to financial decisions for the

family.

03 Tagging stipend payment to

collateral income

The group shared that since Kalam receives a fixed amount

from the government as a stipend because of his existing

condition, the stipend amount can be used as a collateral to

show a fixed amount of income for Kalam. This will also

enable DFSPs to provide loans to Kalam as they will know

the amount and the day when Kalam will be receiving his

stipend.

04 Digitizing bill payment The group shared that Kalam may ask his input retailers to

accept payment made through MFS channels which will

reduce Kalam’s travel to input retailers to buy groceries at

wholesale markets. Additionally, if the government starts to

disburse the stipend through an MFS channel, then Kalam

can easily use that money to pay for his groceries and also

save money in his MFS account for future use.

05 No communication with DFSPs The group shared that DFSPs should increase their activities

at the rural level so that rural people are also aware of their

products and services. Additionally, they recommended

DFSPs recruit agents from the community which will reduce

communication barriers.





01 Location The group mentioned that as Rasheda and Yousuf reside in

a remote area, it is difficult for the couple to travel to formal

financial services outlets located in city hubs.

02 Communication The group shared that it is difficult for both Rasheda and

Yousuf to travel to bank branches during banking hours

since they are working for a local NGO. In addition to time

consumption, travelling to bank branches also incurs travel

costs. Since the couple do not earn a lot of money, the

travel costs can be a significant percentage of their income.

03 Physical infrastructure The group mentioned that as the couple resides in a remote

area, they have difficulty in accessing required amenities

including access to consistent mobile network, electricity

and access to local transports.

04 Financial literacy The group shared that though the couple has partial

knowledge on financial literacy, they are unaware about

different financial products and services.

05 Language barrier The group shared that Rasheda and Yousuf reside in an area

which has its own dialect and language. As such, the couple

may face difficulty in accessing financial services and making

financial transactions.

POSSIBLE SOLUTIONS:


01 Location The group mentioned that while the location of Rasheda

and Yousuf cannot be changed, mobile financial services and

agent banking services can be introduced locally.

02 Communication The group shared that if MFS and/or agent banking is

introduced and if the couple use the channels to make

financial transactions, the commute time be will reduced.

03 Physical infrastructure The group mentioned that improving the physical

infrastructure by development projects and DFS providers

is a long term process with them having less control over



it. However, the introduction of MFS and/or agent banking

will reduce the consumption of some of the amenities.

04 Financial literacy The group shared that though the couple has partial

knowledge on financial literacy, they are unaware about

different financial products and services. Therefore, hands

on training on financial services by DFS providers can

increase the knowledge of the couple on financial services

and products.





01 Location of bank branch The group shared that the local bank branch is located

about 5 kilometers from Nia’s house and as such it takes

her about half a day to travel to and from the bank branch.

02 Insecurity in securing money Since Nia does not use the bank account, she saves the

money in her house. The group shared that it is risky and

unsecured to save the money at her house.

03 Fund transfer The group shared that since Nia does not use a bank

account, it is difficult for Nayeem to transfer money to her,

as he needs to send her cash through another person. Using

this mode to transfer money is risky and can cause financial

loss.

04 Perception on DFS providers’

service delivery

The group shared that Nia has a negative perception on the

service delivery of DFS providers because of her bad

experience with the local bank branch. The group

mentioned that this perception can keep Nia from adopting

formal financial services.

POSSIBLE SOLUTIONS:


01 Location of bank branch The group mentioned that changing the bank branch

location is virtually impossible and therefore mobile

financial services and agent banking channels can play a

crucial role. Both MFS and agent banking will reduce travel

time and costs for Nia.

02 Insecurity in securing money The group mentioned that saving money in MFS and/or an

agent banking account will eliminate physical risks

associated with saving money in the home.

03 Fund transfer The group shared that if Nia and Nayeem use MFS and/or

agent banking channels to transfer funds, it will be more

convenient for both of them. The dependency on others for

fund transfer will be eliminated and financial information will

stay confidential. Moreover, the introduction to formal



financial services will increase financial literacy for both of

them.

04 Perception on DFS providers’

service delivery

The group shared that once Nia feels the benefits of DFS

and its positive impact in her life through the introduction

of MFS and agent banking, her perception on DFSPs will

change.



Annex – 3

Event Agenda

“Increasing the Uptake of Formal Financial Services through a Client-Centric Approach”

Time Session Title

9.00AM Registration

9.30AM Introductory Session

This session will provide an overview of what we mean by financial inclusion really, as

well as providing additional information on the theme for Financial Inclusion Week

2016. The session will also discuss on the current status of financial inclusion in

Bangladesh along with recent trends and the importance of a client-centered

approach and why it is important.

9.50AM Financial Inclusion & Bangladesh Context

This session will provide an overview on the financial inclusion status of Bangladesh

and discuss on the steps that have been taken by the government and development

organizations to accelerate financial inclusion and serve the unbanked population.

10.30AM Challenging the barriers!

In this session, participants will explore scenarios reflecting existing needs,

barriers to accessing formal financial services in Bangladesh, including both social

and economic barriers. It shall also focus on what actions could be taken to link

each individual to formal financial services in ways that are appropriate to the

reality in which they live.

12.00PM Paving the future

This session will discuss what actions and steps development organizations and DFS

providers has taken already and further steps can be taken to accelerate financial

inclusion, We will try to collectively identify gaps that exist that may need to be

addressed.

12.30PM Lunch & Networking

INCREASING THE UPTAKE OF FORMAL INANCIAL SERVICES … · 2017-12-08 · providers including bKash,...

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